Corporate compliance officers always welcome the new year with a string of new regulatory compliance obligations close behind. One that caught my eye for 2020: Australia’s Modern Slavery Act.
Australia’s version of the law actually goes further than the British version, so compliance with it is going to take some dedicated attention.
Technically the Modern Slavery Act went into effect last year, but 2020 is the first year that companies within scope of the law — which is a lot of firms, around the world — will need to start publishing statements about their anti-slavery efforts.
Yes, those anti-slavery statements will be mostly similar to what companies have already been publishing for several years to comply with the U.K. Modern Slavery Act — but the reporting requirements aren’t identical. Australia’s version of the law actually goes further than the British version, so compliance with it is going to take some dedicated attention.
To that end, Australian regulators published guidance in November on what Modern Slavery Act compliance should accomplish, and what information those anti-slavery statements should contain. Let’s take a look.
Australian Modern Slavery Act Basics
Which Companies Are Covered by the New Modern Slavery Law?
Any business working in Australia with more than AU$100 million (roughly $69 million in U.S. dollars) in total annual revenue falls under the act. That revenue threshold applies to Australian and foreign businesses alike, so for virtually all global businesses — yep, this applies to you.
When Is the Reporting Deadline?
Six months after the company’s first full fiscal year that began after Jan. 1, 2019. So companies with a fiscal year that starts every April 1 (which is most Australian firms) must publish their first anti-slavery reports by Sept. 30, 2020, since their first fiscal year will wrap up on March 31, 2020.
Likewise, companies with a July 1 fiscal year will need to file their first reports by the end of 2020. Companies with a Jan. 1 fiscal year (which is most American firms) will file in spring 2021.
What Are Companies Actually Supposed to Do?
The Modern Slavery Act requires companies to publish an annual statement about the slavery risks in their operations and what they are doing to asses and reduce those risks. This statement also needs to include a similar assessment of their supply chain.
Companies aren’t required to certify that their operations or supply chain are “slavery free.” Companies don’t even need to take any specific steps against modern slavery at all. In theory you could publish a report that says your company does nothing about slavery risk and still comply with the law.
Here in the real world, however — Australia, like Britain and other jurisdictions, passed its Modern Slavery Act to pressure companies into doing something about modern slavery. Governments want to see large businesses leverage the power they have over their suppliers to do better at eradicating this menace.
What Goes Into the Anti-Slavery Statement?
The Modern Slavery Act has seven criteria your annual statement is supposed to include. The three that matter most to risk and compliance officers must describe:
- The risks of modern slavery practices in your operations and supply chains
- Actions the company takes to assess and address these risks, including due diligence and remediation processes
- How the company assesses the effectiveness of those actions
A company that already publishes an anti-slavery statement in compliance with the U.K. law might be able to use the same statement for Australia’s version. Australia’s guidance does say that’s permissible, so long as the statement meets all of Australia’s criteria.
Alas, here’s the rub: Australia requires companies to describe the due diligence and remediation they perform on suppliers. The United Kingdom doesn’t.
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To be clear, the U.K. Modern Slavery Act encourages companies to conduct due diligence on their suppliers; but the statute only requires companies to discuss “the steps taken to prevent modern slavery.” Interpret that as you will.
The Australian statute expressly says a company’s anti-slavery statement must discuss the due diligence and remediation the company performs. So the Australia version goes further than the U.K. version — and therefore, the statements you publish for compliance with the U.K. Modern Slavery Act law might not pass muster in Australia.
What Does Modern Slavery Due Diligence Look Like?
So what exactly are companies supposed to discuss regarding their due diligence and remediation? The Australia guidance points to the U.N. Guiding Principles on Business and Human Rights, and cites some specifics.
For example, talk about the steps you take to assess slavery risks, such as screening suppliers and third parties for any past allegations of abuse. Also talk about how you integrate your findings into policies and procedures, such as training employees to watch for modern slavery issues or offering ways to report suspected abuse. The guidance also recommends discussion of how you monitor your anti-slavery efforts, such as internal audits of the supply chain or procurement function.
The good news for ethics and compliance officers is that if we swap “anti-corruption” for “slavery” in the above paragraph, none of that work would sound intimidating.
The good news for ethics and compliance officers is that if we swap “anti-corruption” for “slavery” in the above paragraph, none of that work would sound intimidating. These are steps risk and compliance functions have been taking for years to comply with the Foreign Corrupt Practices Act, the U.K. Bribery Act, and other anti-corruption statutes.
In other words, compliance with the Modern Slavery Act — the Australian version or the U.K. version, really — is more about broadening your compliance capabilities to encompass a new risk, rather than developing new capabilities from scratch.
What will that take? Commitment from executive management to take modern slavery issues seriously. Cooperation from other business functions such as procurement, finance, and internal audit to integrate anti-slavery measures into your due diligence, training, and reporting. The tools and processes compliance functions use might need to be stretched into new uses, too.
That can all be done. Now the clock is ticking to do it.